The aussie plunged over 2% this afternoon after the Reserve Bank of Australia (RBA) cut interest rates for the first time in two-and-a-half years.

The RBA cut its cash rate by 25 basis points to 4.5%, saying inflation was now likely to be more consistent with its long-term target in 2012 and 2013. The decision had been widely forecast, with only isolated commentators caught out by the move. Most economists don't expect the RBA to cut at its December policy meeting, but many warned that if conditions in Europe deteriorated further or local unemployment climbed, it may see the need for another cut. Fresh concerns spread through markets today after Greece announced it would hold a referendum on the proposed debt bailout in January and after the Italian opposition party called on the Italian president to appoint a new government in advance of the G20 meeting.

Earlier in the morning, a weaker-than-expected reading for China's PMI index briefly knocked the commodity-based currency, but that was offset when the final reading for HSBC's China PMI showed a strong expansion of manufacturing activity in the world's second-largest economy. The official reading fell to 50.4 in October from 51.2 in September, whilst the HSBC PMI rose to 51 in October from 49.9 in September.